What is driving the push for increased trading hours for US equities?
When I tell people that we trade US equities overnight, they can’t believe it hasn’t been done before. Other asset classes such as crypto trade 24 hours a day, seven days a week. Futures and FX also trade 24/23 hours, so why not US equities? There really wasn’t great appetitive in the US to trade US equities overnight, people want to trade them on the edges – early in the morning and later in the day. The overnight offering is really designed for investors around the world that want to trade US equities during their daytime hours. It also gives, not just retail investors, but all traders and investors, the ability to trade US stocks during their daytime hours, as well as the ability to manage their risk 24 hours a day.
What sort of benefits could 24/7 trading of equities provide?
Primarily, real-time risk becomes a benefit. If there is a geopolitical event on a Sunday night, you don’t have to wait until the market in the US opens at 9:30 in the morning, you can start trading at 8:00pm on Sunday night to manage your risk related to geopolitical events out there. Also, it provides increased access to the US markets. Today, many investors overseas can go ahead and put a limit order in and hope the order gets executed, or they can buy into a fund and invest in the US markets. Our offering gives people real-time access to real-time actionable bids and offers. Much like they trade on the exchanges today, they can intubate and give an offer and trade the top US stocks – all US stocks for that matter – at any given night over the course of the month. Essentially, it gives the ability to trade US stocks in real-time.
What will trading desks look like to accommodate this change?
Trading desks have changed. Historically, when I was at Nasdaq, we wanted to extend to 24 hours but in major banks but there was no appetite for it. Many of these firms have now opened overseas desks, allowing 24-hour trading to occur. As the sun rises, they are trading different asset classes across the globe. Several market makers also have desks overseas or they now provide overnight coverage here in the US.
What impact do time zones have on this potential shift?
If you think about the time zones, as the sun rises in a particular region, they are going to have access to trade US stocks when they wake up in the morning. This should be able to happen across the globe, 24 hours, five days a week for now. To be clear, we offer trading from 8pm at night to 4am in the morning and fill that void where traditional exchanges are closed. No other ATS operates during that time at this point.
What kind of technology is being/could be used to facilitate this?
Our technology looks much like any other exchange technology or ATS technology out there. We match buyers and sellers in price time priority order much like Nasdaq, NYSE, or Cboe might. Our technology involves matching and price time priority. The clearing houses aren’t open 24 hours, so we have to batch that up and send it to the clearing house in the morning for clearance and settlement, just like we would during the day, in real-time. The trade reporting facilities are also not open 24 hours, so again, we batch that up and send them through in the morning. But it’s the same technology that is used today to match buyers and sellers that we use overnight. Now with our customers, it is a little bit different. It’s probably a lot of hand-held devices, with people trading with their phones. We see this a lot with South Korean, Japanese and Chinese brokers that want to trade US stocks real-time, but through a US broker. We do not interface directly with the Asian retail market, they all have to come through a US broker.